Tax Savvy Executives
59 Pages Posted: 15 Feb 2020
Date Written: October 30, 2019
We investigate why firms include individuals with significant professional tax experience on their senior management team and the consequences associated with the presence of these tax-savvy senior executives. We find that past performance, network connections, geographic location, and tax rate level relative to industry peers are all significant determinants in having a tax-savvy executive on the senior management team. Using propensity score matching, we find that effective tax rates decrease substantially after a tax-savvy executive is added to senior management and revert following the departure of a tax-savvy executive from senior management. We connect the changes in effective tax rates to changes in the usage of foreign subsidiaries in low tax jurisdictions.
Keywords: corporate taxes, employment history, effective tax rates, professional experience
JEL Classification: G30, G31, G32, H25, M12
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